Malpractice insurance has become extremely expensive for some sorts of medical professionals. Patients should worry about this because of the problems of:

adverse selection.
free riding.
moral hazard.

A market in which quality depends on price (rather than price depending on quality) may differ from a normal supply-demand market because it may have:

a downward-sloping supply curve.
a horizontal demand curve.
an equilibrium price that does not clear the market.
opportunities for arbitrage.

Back to Reading Overview